Assume the CAPM holds. The expected return on the market is 18% and risk-free rate of 5%. What is the expected return of a stock with a beta of 0.8?

		10.4%
		14.4%
		15.4%
		19.4%
		Not enough information

Which of the following statements about the Capital Market Line is/are true? [I] A rational investor will only invest in a portfolio along the CML. [II] All portfolios along the CML have the same Sharpe Ratio. [III] An investor is indifferent towards portfolios along the CML.

		I only
		II only
		I and II only
		I and III only
		I, II, and III

Consider the CAPM. The expected return on the market is 15%. The expected return on a stock with a beta of 1.5 is 21%. What is the risk-free rate?

		2%
		3%
		4%
		5%
		Not enough information

As the number of stocks in a portfolio increases, the portfolio systematic risk _________.

		decreases at an increasing rate
		decreases at a decreasing rate
		decreases at an indiscriminate rate
		increases
		may increase or decrease

Suppose that a stock portfolio and a bond portfolio have a correlation of 0.5. Which of the following must be true? [I] When stock price increases, bond price must increase [II] It is possible to achieve diversification by combining the stock and bond portfolios [III] A zero variance portfolio can be formed by combing the stock and bond portfolios

		I only
		II only
		I and II only
		I and III only
		I, II and III